Common Mistakes Florida Medicaid Applicants Make Trying to Qualify for Long Term Care Medicaid Benefits
Florida Medicaid provides some incredibly valuable long-term care benefits for those who qualify. The Florida ICP or Medicaid Waiver program will pay for significant in-home-health aide costs, a portion of an ALF bill, and nearly all nursing home costs. However, many people attempt to apply for Medicaid’s ICP or home and community based waiver program on their own.
Below are some of the most common mistakes I see being made:
1. Giving Away Money or Making gifts to reduce a Medicaid applicant’s countable assets.
Giving away assets or income within five years of applying for long-term care Medicaid will cause Department of Children and Families to defer qualification of benefits for a period of time (the length of this period if ineligibility depends on the value of the gifted assets).
Essentially, any transfer of funds or assets, for less than fair-market value will create a problem. Just because the IRS allows gifting does not mean Medicaid does as well (they don’t). Medicaid rules do not have to match IRS regulations – they are two totally different agencies.
2. Relying on out-dated or poorly drafted durable powers of attorney or other estate planning documents when attempting Medicaid planning.
Failing to include the specific authority to give gifts to a family member and to enter in to a personal service contract with the holder of the power of attorney are other mistakes. This will cause Department of Children and Families to deny the Medicaid application.
Relaying on an old or bad power of attorney form can hamstring our Medicaid planning efforts, or require a guardianship proceeding.
3. Failure to create or properly maintain a Qualified Income Trust (QIT) or Miller Trust.
A QIT or Miller Trust is essential when a Florida Medicaid applicant’s gross income exceeds $2,349.00 (from all sources) per month as of 2020 (the income cap number increases periodically). If you do not create a properly drafted Miller Trust, and fund it during the same month as when the Medicaid application is submitted (and each month thereafter), the Medicaid application will be deemed ineligible.
4. Failure to take required minimum distributions from qualified retirement accounts.
Most people know that qualified retirement accounts (e.g. IRAs, 401ks, SEPs) are treated differently then other investment accounts. They are given special consideration by the IRS and are protected against the threat of creditors. However, there are specific steps that must be taken to ensure that they are not held against a Florida long-term care Medicaid applicant as a countable resource.
Essentially, if one is eligible to take regular distributions, they must do so and the asset itself will be deemed exempt. However, the distributions are counted as income, which may necessitate the creation of a qualified income trust / miller trust.
Also, each and every qualified retirement account must take its own regular distributions in order for Medicaid’s eligibility requirements to be met. This is another example of how IRS rules do not always match Medicaid rules.
5. Failure to liquidate certain annuities or life insurance policies that possess cash surrender value.
If the face value (i.e. death benefit) of any life insurance policies are more than $2,500.00, their cash value will be deemed a countable asset. These life insurance policies have to either be borrowed against or completely liquidated before submitting a Medicaid application.
Certain life insurance policies do not have cash value (i.e. term life insurance) and will not be considered countable assets. But universal or whole life policies almost always have a cash-value accumulation component and must be dealt with appropriately in order to become eligible for Florida ICP / nursing home or waiver benefits.
Non-qualified annuities may also have cash value and that cash value will be counted as an asset against Medicaid eligibility. Regular annuities can be converted into a medicaid-qualified annuity or cashed out.
6. Failure to have the funeral contract made irrevocable before submitting a Medicaid application.
A funeral contract is considered to be a countable asset if its refundable. If this causes countable assets to exceed the $2,000 Medicaid limit, Department of Children and Families will deny the Medicaid application. The simple fix is to ask for an irrevocability rider to ensure that the funds cannot be returned.
In addition, separate bank accounts with no more than $2,500.00 can be deemed non-countable if they are designated as being for funeral expenses.
An irrevocable pre-paid funeral contract, on the other hand, has no value limit.
7. Failing to Reveal all Assets or Income Sources to DCF.
When you apply for Florida Medicaid, you also sign a financial release that allows Medicaid to access your tax returns and write to any financial institution to investigate your bank accounts, brokerage accounts, etc… Failing to report all assets is a crime.
Also Medicaid applicants, and those already receiving benefits must report any changes in income or assets, to DCF, within 10 days of the change in circumstances.
8. Failing to plan for the possibility that the community spouse might predecease the institutionalized spouse receiving long-term care Medicaid.
About 30% of caregivers will die before the people that they care for do. This is often because care-giving can be so stressful. When its a spouse, it can be difficult for the caregiver to remember to take care of themselves. Ordinary estate planning has one spouse leaving the entirety of their assets to their surviving spouse. But if a non-Medicaid spouse only has a will (or dies intestate) that leaves assets to the Florida long-term care Medicaid spouse – this will unintentionally result in the loss of Medicaid.
9. Failing to plan around non-homestead real estate.
While Medicaid estate recovery does not apply to homesteads in Florida, that does not prevent Medicaid from trying to recovery against second homes or rental properties owned by the Medicaid beneficiary after they pass away. An experienced medicaid lawyer can guide you on how to qualify for Medicaid, despite owning more than one piece of real estate, and then how to avoid having to sell that real estate to pay back Medicaid after passing away.
10. Failing to Apply for Other Benefits.
Medicaid wants to be the “payor of last resort” what this means is that if the applicant is entitled to other benefits, then they have an obligation to apply for those benefits. As an example, someone younger than age 65 who needs help at home or requires ALF or nursing home care, would be a candidate to apply for social security disability. They must do so. The other common examples is applying for VA pension with aid and attendance benefits if eligible to do so.
Its easy to understand why Medicaid wants this.